Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Problem 7-9 A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and
Problem 7-9 A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term bond fund, and the third is a money market fund that provides a safe return of 7%. The characteristics of the risky funds are as follows: Stock fund (s) Bond fund (B) - Standard deviation Expected Return 19% 14 The correlation between the fund returns is 0.10. You require that your portfolio yield an expected return of 16%, and that it be efficient, that is, on the steepest feasible CAL. a. What is the standard deviation of your portfolio? (Round your answer to 2 decimal places.) |Money market fund Stocks Bonds b. What is the proportion invested in the money market fund and each of the two risky funds? (Round your answers to 2 decimal places.) Proportion Invested Standard Deviation 31% 29 % % 196 96
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started